Gold prices seen moving beyond Rs 35,000 this year

Chennai: Gold prices are set to move beyond $1,400 per ounce this year and this will see futures prices in the Indian market touching an all-time high range of Rs 35,000 per 10 gm. Some analysts predict that prices can go up even to $1,525 per ounce and Rs 37,000 in the best case scenario for the precious metal.

In a survey on gold price predictions for 2019, conducted by the London Bullion Market Association (LBMA), two-thirds of the analysts suggested gold reaching or surpassing the $1,400-mark at some point during the year.

While markets have factored in some of the downside risks of Brexit and US-China trade wars, other factors such the level of US real interest rates, strength/weakness of the dollar, the likely impact of geopolitical factors and the pace of global economic growth continues to generate uncertainty, which will make investors flock to safe haven assets like gold, found the analysts.

In the Indian market, the rupee-dollar movement will largely decide the price level for gold. “If the rupee stays in a range of 70-72, we will see gold price moving up to Rs 34,800 and Rs 35,000. If the rupee weakens further, gold prices can gain more,” said Himanshu Gupta, Vice President and Head of Commodities and Currencies Research, Globe Capital.

Jateen Trivedi, Research Analyst, Bonanza Portfolio, too, has a similar outlook on gold. “The broad view for gold has been bullish since December 2018 when it was trading at Rs 30,000 levels, as the trade war impact on world’s major economies had started to be priced in. Even now when the trade issues are being resolved, we expect prices of gold to be bullish. We are looking at gold hitting the levels of Rs 34,800-35,000 when gold hits $1,400 at Comex.

Analysts do not rule out gold prices moving beyond $1,400 in 2019 if the US Federal Reserve goes for more rate cut.

“Definitely, prices will go beyond $1,400 in 2019 as the developments--trade issues, geopolitical tensions and Fed rates--give positive triggers for gold going ahead. More importantly, rupee movement, which is currently looking weak due to increasing crude prices, remains positive for the upside potential of $1,400 in current situation and $1,525 in the best case scenario if the Fed starts cutting rates. This will see prices touching Rs 37,000–38,500 in the domestic market,” said Trivedi.

Continuing the positive momentum in the market, on Tuesday, gold prices in the Delhi spot market rose by Rs 230 to Rs 34,680 per 10 gm.

The dollar index continues to be a key factor influencing gold rates. The US Fed’s decision to hold on interest rate hike will keep the US dollar from further strengthening. “The dollar index has dropped from 103 levels in January 2017 to 88 by February last year. Though there has been a recovery, the dollar index has not been able to breach 97 levels and is not likely to in the near future,” said Gupta.

Analysts argue that the tax-cut-induced growth in the US economy will be a temporary phenomenon and lead to a bigger crisis later.